Economy & Politics

Comment: Germany groans into the lockdown extension

Chancellor Merkel with Berlin’s Governing Mayor Müller and Bavaria’s Prime Minister Söder (right): Is the extension of the lockdown enough to reduce the number of infections?dpa

The first lockdown in Germany in the spring was tough but successful. The second “lockdown light”, which we have been experiencing for a month now, is less tough and unsuccessful. The exponential growth in the number of cases has stopped, but it remains at a worryingly high level, and the number of deaths per day also remains at a record high. And that’s why it is being painfully extended until Christmas, while neighboring countries such as France and the Czech Republic are recording significant successes.

The estimates four weeks ago would cost the “Lockdown Light” up to 20 billion euros in added value for one month, and the federal government up to 15 billion euros in “November aid”. The government is now planning a further 17 billion euros in “December aid”. Since everything is unclear and threatens to become much more expensive, a buffer of 20 billion euros is estimated immediately, and new debt is expected to rise to 180 billion euros in the coming year.

In short: Germany pays a high price in every respect – without really having a sense of achievement. On the contrary, everyone seems increasingly dissatisfied: about the unclear communication, the foggy November view, the tired roll calls, the high costs, and in the background retail and gastronomy continue to ring their death bells. The shops remain open, but sales in stationary retail have collapsed by up to a third. The Christmas business, which this year is more existential than ever before, threatens to become a ghost walk.

Only a hard lockdown works

Is Germany doing something fundamentally wrong in the second wave? Well, at least we don’t seem to be getting everything right.

A study by the Institute for New Economic Thinking has once again examined the data from all lockdowns with the question of how countries weigh up between economic slumps and deaths – with one clear result: lockdowns work, but only if they are strict and tough, and then work them quickly within four to six weeks. Examples are Australia, New Zealand, Iceland, South Korea, Taiwan – and of course China.

The core insight is as follows: No country can prevent the economic damage without first successfully fighting the pandemic. Countries that have been more likely to try to protect their economies are paying a higher price in protecting the lives of their people – without really having the pandemic under control. And: “Those who delayed the reaction or fluctuated between the strategies”, according to the study authors, “suffer from the worst of the two extremes”. They would be “caught in a catastrophic feedback loop” as they have to invest more and more – while the number of cases increases and economic output decreases. In the end, there will be a much tougher lockdown at some point – the UK is a chilling example.

So if you pull out the hammer right from the start and, above all, persevere, you get positive feedback: The slump is deep, but the economy can recover quickly. Until a few weeks ago it looked as if Germany had succeeded in doing just that. In the third quarter, after the historic crash, the economy grew by 8.5 percent. 2020 seemed to end far less badly and more forgivingly, better than almost any scenario drawn in the spring. Now we can expect stagnation or another sharp decline in the fourth quarter, and in the half-sentences with which we paint the eternal scenarios, the addition “until March” is increasingly replacing “until Christmas”.

A risky bet

Economically, of course, we are far from being trapped in a negative feedback loop. But the German state has to spend more and more money to compensate for the loss of added value without actually being able to give the all-clear. Perhaps we are subconsciously making a big bet that we will buy ourselves time before the vaccine can be distributed. In other words: We “manage” an infection rate of 15,000 to 20,000 new cases per day in the hope that the health system will withstand this (four out of ten hospitals still have free capacities, only 14 percent are busy).

It’s a risky bet. As diffuse as the infection process is, so diffuse are the motives and feelings of our behavior. Are we too reckless, self-confident and complacent or just exhausted, annoyed and irritable? At least the broad consensus and prevailing common sense that formed the basis of the spring’s success have cracked. It crunches and squeaks in every corner, we listen to messages that nobody wants to hear anymore, get caught up in contact rules that regulate what cannot be controlled down to the top of each pine tree – and keep pouring money over everything. The result of the lack of a superstructure is stagnation, perplexity and further exhaustion. At least emotionally, we threaten to get into the negative feedback loop.

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